On Holding AG   ONON   $18.00-$20.00 31.1 million shares Underwriters:  Goldman Sachs, Morgan Stanley, J.P. Morgan, Allen & Company, UBS Investment Bank, Credit Suisse  Co-Managers:  Proposed trade date of 9/15  They are a premium performance sports brand rooted in technology, design and impact that has built a passionate global community of fans across more than 60 countries.

On Holding AG   ONON

• 31,100,000 shares to be offered between $18.00 and $20.00 per share
• Underwriters: Goldman Sachs, Morgan Stanley, J.P. Morgan, Allen & Company, UBS Investment Bank, Credit Suisse Co-Managers:
• Proposed trade date of 9/15
• Rating =4

Click here to view the prospectus.

https://www.sec.gov/Archives/edgar/data/1858985/000119312521265974/d175570df1a.htm

Company Overview

On is a premium performance sports brand rooted in technology, design and impact that has built a passionate global community of fans across more than 60 countries. They have a selective wholesale presence in approximately 8,100 premium retail doors globally and they generated 37.7% and 36.6% of their net sales in 2020 and the six-month period ended June 30, 2021, respectively, through their direct-to-consumer (“DTC”) channel, which is primarily driven by their website.

They believe they are one of the fastest-growing scaled athletic sports companies in the world, having grown their net sales at an 85% compound annual growth rate (“CAGR”) from inception through 2020 to CHF 425.3 million for the year ended December 31, 2020. Their growth has continued in 2021, with net sales growing by 84.6% to CHF 315.5 million for the six-month period ended June 30, 2021 compared to the six-month period ended June 30, 2020. They focus on providing a premium product experience to customers wherever they are, and their brand resonates with their loyal customers around the world. As a Swiss company with a small home market, they opted to expand globally from the very beginning, and today they have a fast-growing presence across a number of international markets including, among others, Germany (first entered in 2011), the United States (2013), Japan (2013), China (2018) and Brazil (2018). They believe this global presence within the large global footwear and apparel market positions them well for future growth.

They believe their Swiss heritage and their focus on innovating at the cutting edge of performance, design and impact differentiates them from other sports brands. They are committed to creating premium products that deliver strong performance. Their relentless culture of innovation has driven them to repeatedly introduce numerous groundbreaking technologies such as CloudTec (2010), purpose-engineered Speedboard (2013), Lightweight Trail Missiongrip (2016), ultra-lightweight yet versatile running apparel (2016), Helion Superfoam (2019) as well as Embedded CloudTec (2019) and the Invisible CloudTec (2020). These innovations are designed to change the experience of running and create continuous excitement for their fans as they bring new products to market.

The exceptional performance, comfort and design of On footwear and sports apparel has led runners and a broader set of consumers to adopt On’s products in their everyday lives. They have supported their strong demand by creating performance products for an active lifestyle and exploration of nature and trails. Their Performance All Day range of products fuses function and aesthetics and includes “The Roger” franchise, which has been developed with Roger Federer after he joined On as an active co-entrepreneur in 2019 and investor. While developing a competition tennis shoe with Roger, he suggested extending On’s patented technology to a tennis sneaker family to re-invent how age-old tennis sneakers are made. This is enriching their performance product offering and they believe Roger’s perspectives and insights as a professional athlete will help improve their product development, marketing and fan experiences. Their Performance Outdoor products embrace a new approach to taking on the mountains: light and fast, with shoes and outdoor apparel engineered to free you from the weight and bulk of traditional outdoor gear.

Athletes know that it takes significant effort to make performance look effortless. The On apparel range includes ultralight and stretchable fabrics, intelligently engineered key details and a style designed equally for the track and the street. Their “Essentials” range includes the running jacket, running shorts, sweatpants and other items that are versatile enough to be worn during running, exploring or simply during all-day activities, which is why they believe they are favored by their fans and continue to drive repeat purchases.

All their products are engineered in Switzerland, and their in-house research and development teams work on the innovation, engineering, design, and testing of their products. With their heritage in the Alps, making a positive environmental impact has been a core value for their business since inception. On aims to minimize the environmental footprint of all their activities, with a special focus on using preferred materials, carbon dioxide (“CO2”) reduction and life-cycle circularity. In 2020, they announced Cyclon, their first 100% recyclable shoe, which is only available through an innovative monthly subscription model. Through its groundbreaking design and subscription model, Cyclon has already won the 2021 ISPO Award for Product of the Year and Sustainability Achievement.

On is built on authenticity as their loyal following of professional athletes has inspired amateur runners and other fans to join the On community, which is growing larger every day. This community is full of passion, whether in a running club, a weekend jog, a trip to the coffee shop or competing at the highest levels of athletic competition. Their Net Promoter Score (“NPS”) of 66 is among the highest of all consumer facing brands surveyed, and more than 75% of customers recommend On to their friends.

Their distribution strategy seeks to meet runners wherever they are. At the time of their founding, they first started selling in specialty running stores where discerning runners discovered On and became committed fans of their brand. Over time, they expanded their product range and broadened the range of their distribution partners. Today, their products are present in some of the most reputable outdoor, fashion and lifestyle retailers in the world, in addition to specialty running stores. In 2020 and the six-month period ended June 30, 2021, their wholesale channel accounted for 62.3% and 63.4% of their net sales, respectively. With their community and brand awareness growing globally, they organically started to scale their DTC channel through on-running.com over the last 9 years. DTC sales have increased significantly. Their DTC channel, which includes their e-commerce sites, a recently opened flagship retail store in New York City and four smaller format retail stores in China, generated 37.7% and 36.6% of their net sales in 2020 and the six-month period ended June 30, 2021, respectively. Through their DTC channel, they create an immersive customer experience from educational product innovation content to inspirational storytelling. Through these initiatives, they believe that they build deeper customer connection and loyalty and learn from data, while also realizing attractive margins.

IPO Detail

This is the initial public offering of On Holding AG and no public market currently exists for its common stock. On Holding AG is offering 31,100,000 shares of common stock as described in the prospectus. The company expects the initial public offering price of its common stock to be between $18.00 and $20.00 per share. The company has applied to list its common stock on the New York Stock Exchange under the symbol “ONON.”

They have two classes of authorized ordinary shares: Class A ordinary shares and Class B voting rights shares. Class A ordinary shares and Class B voting rights shares are identical, except with respect to par value (based on which entitlements to dividends and other distributions are calculated), voting power, conversion and transfer rights. Class A ordinary shares have a par value of CHF 0.10 and Class B voting rights shares have a par value of CHF 0.01, and as a result, on a capital-invested basis, each Class B voting rights share has ten times the voting power of each Class A ordinary share. The Class B voting rights shares are subject to transfer restrictions and mandatory conversion into Class A ordinary shares upon the occurrence of certain events.  All of the Class B voting rights shares will be beneficially owned by David Allemann, Olivier Bernhard, Caspar Coppetti, Martin Hoffmann and Marc Maurer (their “extended founder team”). Accordingly, following this offering, their extended founder team will control shares representing 59.4% of the total voting power of their shares, assuming no exercise of the underwriters’ option to purchase Class A ordinary shares. Accordingly, their extended founder team will be able to significantly influence any action requiring the approval of shareholders,

Use of Proceeds

They estimate that the net proceeds to them from the offering will be approximately $448.6 million. The principal purposes of this offering are to increase their capitalization and financial flexibility, create a public market for their Class A ordinary shares and facilitate their future access to the capital markets. As of the date of this prospectus, they cannot specify with certainty all of the particular uses for the net proceeds to them from this offering. However, they currently intend to use the net proceeds they receive from this offering for general corporate purposes, including working capital, operating expenses, and capital expenditures. They will not receive any of the proceeds from the sale of the Class A ordinary shares by the selling shareholders.

Competition

Market Opportunity

Their core opportunity is the approximately $300 billion global sportswear market—an intersection of the $119 billion sports footwear market and the $174 billion sports apparel market. According to Euromonitor International, the global sportswear market is projected to grow at a 8.9% CAGR over the next five years, outpacing the global non-sports footwear and apparel market five-year CAGR of 6.8%.

• Footwear: According to Euromonitor International, the global sports footwear market generated $119 billion of retail sales in 2020 and is expected to grow at 9.9% per year through 2025, compared to the 5.3% yearly growth for non-sports footwear.
• Apparel: According to Euromonitor International, the global sports apparel market generated $174 billion of retail sales in 2020 and is expected to grow at 8.2% per year through 2025, compared to the 7.0% yearly growth for non-sports apparel.

They see significant potential to further expand their business globally. For example, Asia-Pacific represents just 5% of their net sales in 2020 and 6% of their net sales in the six-month period ended June 30, 2021, but accounts for 28.7% of the global sportswear market and is projected to be the fastest-growing region over the next five years. They have launched and achieved significant growth in more than 60 countries since their launch and they believe their continued expansion in key geographies will accelerate their growth and brand awareness in the sportswear market

Target Markets

Grow Brand Awareness and their Community

They believe that powerful consumer trends will continue to expand the approximately $300 billion global sportswear industry and that their differentiated product offering and appeal to their loyal community will drive increasing market share. They believe their brand is globally recognized today, and they have significant opportunities to further grow their brand awareness and expand the size and breadth of their community. While they have meaningfully grown internationally over the past decade, their unaided brand awareness outside of Switzerland remains below established sportswear peers, providing them with a clear runway ahead.

Authenticity gained through word of mouth, recommendations from athletes, influencers, tastemakers and a global community of runners and explorers has proven extremely valuable in organically and credibly growing the On brand. To further drive their brand’s awareness now and in the future, their internal agency team will focus on the following strategies:

Their internal agency team collaborates across the business to ensure they are integrated directly into decision making for premium product storytelling, new innovative services, authentic community growth and shareable moments. At its heart, their marketing philosophy is simply to work with those who love their product, which they believe supports their high marketing efficiency and authenticity.

Expand their Geographic Footprint Through Controlled, Multi-channel Growth

They are in a growth phase in almost all of their international markets and they believe they have opportunities for continued market share gains. While they have generated net losses in recent years, they have achieved significant net sales growth historically as they have entered new markets. For example, On entered the United States in 2013 and has grown net sales to CHF 202 million in 2020 and CHF 157 million in the six-month period ended June 30, 2021. In their home market Switzerland, they have grown net sales to CHF 52 million in 2020 and CHF 27 million in the six-month period ended June 30, 2021. They entered China in 2018 and grew their net sales in the region by 199% from CHF 1.8 million in 2019 to CHF 5.5 million in 2020. They have continued to grow their net sales across these international markets for the six-month period ended June 30, 2021, with China accounting for CHF 8 million of net sales during that period.

They believe that pioneering a true multi-channel strategy will ultimately lead to superior outcomes, lower cost of customer acquisition and higher customer retention and repeat purchases. Their wholesale and their DTC channels are mutually beneficial to each other because they always put the customer first. They ask ourselves which customers they want to attract and what is the best and most efficient acquisition channel to deliver a superior experience to these customers. They then aim to deliver that superior experience wherever the customer decides to shop, whether online or in a physical store.

They intend to continue to grow their global footprint by tapping into new customer segments without compromising their premium customer experience across their wholesale and DTC channels:

• Wholesale channel expansion: They intend to take a measured approach to attract new customers and enter new markets through selected retail partners that are complementary to their brand. They started with the run specialty channel and then selectively expanded to additional premium retail partners to reach a broader audience, building on the initial momentum and brand halo gained by their presence in specialty stores.
• DTC channel expansion: The second pillar to the multi-channel growth is their DTC channel, both digital and physical, which they believe enables greater consumer engagement and offers an optimal environment to showcase their brand. They believe that this customer experience will lead to a continued increased share of their DTC channel in the long term, while the short term share continues to depend on the duration and impact of the COVID-19 pandemic and the consumer behavior in the immediate post COVID-19 periods. Their DTC business represented 37.7% and 36.6% of their net sales in 2020 and the six-month period ended June 30, 2021, respectively.

Leverage Innovation Leadership to Broaden Product Portfolio

They founded On with a view of making movement more effortless and comfortable. Since their founding in 2010, they have expanded their focus beyond runners and their shoes. Their innovation teams are including Swiss engineered technology in their products that can be worn while running, exploring or simply during all-day activities. They believe they can leverage their expertise in running to improve the functionality of products in adjacent lifestyles, including fitness, everyday use, outdoors and most recently tennis, and to broaden their product portfolio from footwear to apparel and accessories. While they expect to always be deeply rooted in running, consumers around the world have shown an interest in their other products, significantly increasing On’s total addressable market.

Continue to Drive Operational Excellence

As they scale their business, they plan to continue leveraging their brand and powerful business model to drive operational efficiencies and improved financial and operating performance in the following ways:

Company's Unique Strengths

In-house Innovation Fuels Portfolio of High Performance Products

From its founding, On’s objective has been to revolutionize the sensation of running. Transforming how they experience one of the most basic skills of the human body required a radical approach to innovation. They focus their innovation efforts on the areas of performance, design and impact, as they aspire to increase performance for athletes and consumers, apply smarter design thinking to their products and create the path to a more sustainable future.

In 2010, they introduced their innovative, patented technology, CloudTec, to the world. Since then, they have continuously innovated to create a wide portfolio of award-winning products and proprietary technologies. They pioneered the use of flex plates in all of their shoes as early as 2010. In 2013, they introduced the first injection molded, purpose-engineered Speedboard to transition impact forces into explosive push-offs. They introduced the Cloud model with the Zero-Gravity outsole in 2014 to offer an ultralight product. They then developed Missiongrip in 2016 to bring On to the trails and outdoors and also introduced the Hybrid Short and Lightweight Jacket, their first versatile, ultra-lightweight running apparel with advanced fabrics. In 2019, they introduced the Helion superfoam to add even better cushioning to their shoes without compromising performance. With the introduction of the Cloudstratus in 2019 and the patented sequential CloudTec solution, they once again provided additional cushioning for runners seeking added support. In 2020 they launched the Cloudboom with an optimized carbon infused Speedboard to power their professional athletes and competitive runners. In the same year, with the launch of The Roger franchise, they established that CloudTec can be engineered for lateral movements and to be completely invisible without losing On’s innovative walking and running sensation.

Their in-house research and development team includes a talented team of sports scientists, engineers, material experts and designers who work out of the On Labs in Zurich and Ho-Chi-Minh City. They aim to deliver a constant stream of innovations inspired by the product vision of the On team, the needs of their world-class athletes, customer feedback and advances in materials and manufacturing technologies. They also partner with leading universities, such as the Swiss Federal Institute of Technology and the Fraunhofer Institute, and with innovative suppliers to co-develop new technologies and introduce them to market. These innovations and the performance they deliver have established On as a trusted brand for world-class athletes, amateur runners and customers looking for performance-infused footwear, sportswear and accessories.

At On, they aim to give each product a special advantage by including performance-enhancing technology, such as bringing running technology into street sneakers or adding stretch and running-grade breathability to a hiking jacket. On products have an iconic design and are versatile to use, as they synergistically combine engineering solutions with a minimalist Swiss design aesthetic. They believe their relentless focus on innovation, design and Swiss quality leads to advanced products that allow them to maintain premium price points and encourage repeat purchases among their customers.

Authentic, Premium Global Sports Brand

The On brand is defined by innovation and a belief that sports and movement ignite and elevate the human spirit.

Their roots in Zurich, near the Swiss Alps, gave On and their team a special appreciation for the outdoors, nature and movement from the very beginning. Additionally, the relatively small domestic Swiss market drove On’s early quest for international expansion. On’s Swiss heritage is strongly reflected in many aspects of the brand, from the Swiss-engineered technology and design to the focus on impact and the global profile that the brand has already achieved.

They have been privileged to receive very early support from a global team of world-renowned athletes and brand ambassadors who continue to showcase the advances in their innovation through their exceptional performances on some of the sports world’s largest stages. Whether it is Nicola Spirig who won the Olympic Triathlon silver medal in 2016 or Javier Gomez Noya who became the Triathlon World Champion Long Distance in 2019, athletes who push their limits trust their brand.

More recently, the On Athletics Club (“OAC”), a partnership between On and a team of eight world class runners, was formed for the purpose of supporting athletes in their quest to become champions. The needs of these athletes spur their innovation and development of products that reinforce the foundation of their brand.

On’s early success came from word-of-mouth recommendations, and they have continued to develop storytelling through the rapidly growing digital channels, social networking media and public relations, which has proven to be a more authentic and effective brand marketing strategy than traditional advertising. On their journey, they have formed a deep connection with their global community through inspirational stories, immersive event series, feature-length award-winning films, educational retail experiences and thoughtful user interface. They believe their deep connection with their customers is evidenced by their love for the brand, level of engagement and loyalty, which are among the highest in the industry. Along the way, they have hired more than 100 talented creative team members who are passionate about storytelling and work closely with their athletes, engineers and product designers to bring the performance and experience of their products to life. This is why performance, engineering, design and creativity form an inseparable bond at Team On. Over the last few years, this has driven significant attention to the On brand with stories featured on the sports front page of The New York Times, digital broadcasts that have more than half a million fans tuning in live and queues of sneaker fans building in front of tastemaker doors in New York, Tokyo and Shanghai.

Global Community of Loyal Fans

On is a beloved running brand with a global community of millions. The foundation of their community is their relationship with their runners that range from marathoners to weekend joggers. Their global initiative to host events for local run crews has further empowered their loyal fans to become advocates of their brand, and they have hosted 132 events in 2019. Their customers’ affinity for their products is demonstrated by the fact that 43% of their customers own more than one pair of On shoes and 75% have recommended On to somebody else. Their fans are highly engaged through social media as well, with 3.5% of their users on Instagram acting on their posts.

Despite being founded just over ten years ago, On has significant global reach with 49% of their 2020 net sales to customers in North America, 44% to customers in Europe, 5% to customers in Asia-Pacific and the remaining 2% to customers in the Rest of the World. In the six-month period ended June 30, 2021, 52% of their net sales were to customers in North America, 41% to customers in Europe, 6% to customers in Asia-Pacific and the remaining 1% to customers in the Rest of the World. They believe the On brand and their products resonate strongly with consumers globally, and they see very strong growth rates across their key markets. Compared to 2019 and despite the negative impact of the COVID-19 pandemic and a net loss of CHF 27.5 million in 2020 compared to a net loss of CHF 1.5 million in 2019, net sales growth in 2020 compared to 2019 was 46% in Europe, 86% in North America and 29% in Asia-Pacific. For the six-month period ended June 30, 2021, they had net income of CHF 3.8 million, compared to a net loss of CHF 33.1 million in the six-month period ended June 30, 2020, and net sales growth in the six-month period ended June 30, 2021 compared to the six-month period ended June 30, 2020 was 56% in Europe, 105% in North America and 154% in Asia-Pacific.

As their community has grown, they have successfully broadened their reach beyond running and trail athletes to outdoor enthusiasts, travel explorers and consumers with an active lifestyle. They believe their uncompromising approach to delivering an authentic and unmatched consumer experience resonates with a broad and diverse global consumer base that spans genders and generations. This global community is the driver of their “grassroots” marketing and the inspiration for their innovation.

Committed to Positive Impact

On is committed to growth from sustainable resource use. On has built an in-house team of experts which tracks the environmental footprint of all their activities through lifecycle analyses, identifies their largest levers for a positive impact and helps them set meaningful targets. They use recycled materials wherever available and work with their suppliers to create new opportunities to use circular or non-petrol- and non-food-chain-based materials. They have already made strong progress towards their goal of using 100% recycled polyester, 100% recycled polyamide and 100% organic certified natural materials by 2024.

They strive to create a majority of their products with a circular life cycle and are in the process of building up the logistics needed for an efficient back loop from consumers to their recycling partners. An important pilot project for circularity is Cyclon (currently available for pre-registration), their first high performance running shoe that is fully recyclable and made from over 50% bio-based materials. Cyclon will only be available as a subscription model to ensure they can reclaim and reuse the shoe’s materials. This represents a significant milestone in their long-term quest to create a “closed loop” system for their products. Cyclon’s CO2 footprint is 50% lower than an average On shoe and creates 90% less waste. They are currently introducing 100% recycled, FSC-certified cardboard packaging for footwear and 100% recycled HDPE plastic for apparel, further reducing waste.

They have committed to ambitious CO2 reduction targets that are approved by the Science Based Targets initiative (SBTi). All their top suppliers have committed to their Restricted Substance List (RSL) policy, which is aligned with the industry standard AFIRM Group and all their Tier 1 suppliers are publicly listed on their website.

Highly Complementary, Multi-Channel Distribution Strategy

They consider their DTC and wholesale channels highly complementary and brand-enhancing.

Their DTC channel, which represented 37.7% and 36.6% of their net sales for 2020 and the six-month period ended June 30, 2021, respectively, is primarily comprised of their own e-commerce platform, but also includes their platform on Tmall and JD.com in China, and the recently opened flagship store in New York City and four retail stores in China. They believe their e-commerce penetration is market-leading when compared to other leading global athletic footwear players. During 2020, their e-commerce platform recorded more than 60.4 million visits, representing a 136% increase compared to 2019. In the six-month period ended June 30, 2021, their e-commerce platform recorded more than 38.9 million visits, representing a 36.8% increase compared to the six-month period ended June 30, 2020. Their DTC channel is their fastest growing channel and has higher gross margins than their wholesale channel.

Their culture of innovation extends to the in-store experience. Their flagship store in New York City offers an explorative, immersive and tech-driven experience to customers. The store features a “Magic Wall” that scans shoppers’ running styles in real-time and cross-references the customer’s unique running attributes against a database of more than 50,000 runs to help them find the perfect On shoe for their running style and needs. They believe the innovation and personalization exemplified by this technology are core to their business and highly valued by their customers.

The wholesale channel accounted for 62.3% and 63.4% of their net sales for 2020 and the six-month period ended June 30, 2021, respectively, and they have built strong relationships with some of the most selective retailers in specialty running, outdoors, fashion and lifestyle. Notwithstanding their significant whitespace, their approach to wholesale expansion remains very disciplined, and they carefully select the best retail partners and distributors to represent their brand in a manner consistent with their ethos and premium positioning. As of June 30, 2021, their products are available at approximately 8,100 retail stores across more than 50 countries. More than 1,300 dedicated On shop-in-shops and brand corners allow consumers to have a physical interaction with their brand at wholesale doors. The majority of their wholesale partners are premium specialty stores that operate less than 5 retail stores and play an important role in establishing and reinforcing On’s credibility in their respective communities.

Adaptable, Data-Driven, Industry-Leading Operations in Place to Support Future Growth

From the very beginning, building a scalable and adaptable operating infrastructure was important to ensure that the right manufacturing, logistics and data capabilities were in place to efficiently support their future growth. Freight operations, warehousing and logistics are outsourced to trusted partners that they have worked with since their founding. Their manufacturing footprint is concentrated in South East Asia with most products originating in Vietnam. In 2020, 97% of their footwear was produced in Vietnam, while the remainder was produced in Indonesia, and in the six-month period ended June 30, 2021, all of their footwear products were produced in Vietnam. Trust, innovation, quality, lead times, flexibility, automation, social responsibility and impact have been their key focus areas in their longstanding partnerships with their footwear and apparel factories. Their in-house team in Vietnam works with their partners and ensures the quality of all the premium products that they design, innovate and develop. In 2020 and the six-month period ended June 30, 2021, approximately 63% and 38%, respectively, of their apparel and accessories products were manufactured in China, with the remainder being produced in Vietnam and Europe.

Given their belief that superior analytics will help them to make not only smarter but also more sustainable decisions, they have made early investments in an integrated, globally consistent, cloud based IT infrastructure that supports them to achieve profitable growth and manage the complexity of their business. Understanding global supply and demand patterns across their channels helps them to make informed, AI supported decisions, which helps them reduce overstock and produce exactly what their consumers want.

Positivity is one of their spirits, and therefore, they consider customer service a core competence. They believe their team delivers premium engagement with customers and builds relationships rather than just completing transactions. They have recently upgraded their enterprise resource planning (“ERP”) system to support their growth strategy, upgraded their dedicated CRM system to deliver integrated customer services and sales tools and expanded their warehousing and distribution coverage with automation.

Their adaptable supply chain, well established manufacturing and distribution partners and their global infrastructure allow them to seamlessly and rapidly scale their operations across diverse geographies and sales channels while ensuring delivery of superior quality products and services.

Partnership-Focused Leadership Model and Diverse Employee Base

Their co-founders, David Allemann, Olivier Bernhard and Caspar Coppetti, were industry outsiders when they set out to change the world of running. With passion and discipline, and together with their partners and Co-CEOs, Martin Hoffmann and Marc Maurer, they have grown On into a global brand with scalable operations and built a committed, high performing team.

Since their founding, they have leaned heavily on the core tenets of the team spirit and partnership. The unique leadership structure that they have honed over the last decade differs from a traditional hierarchical model and includes David Allemann and Caspar Coppetti as Executive Co-Chairmen, their innovation-leader Olivier Bernhard as Executive Board Member, Martin Hoffmann as CFO and Co-CEO and Marc Maurer as Co-CEO. They are surrounded by a team of 14 highly talented senior leaders globally with 6 female leaders in key roles. Every senior leader has an individual mission, and with this structure, the team benefits from a rigorous decision making process that leverages the full strengths and capabilities of a diverse team in running the global business.

They believe that building an inspiring and successful brand is only possible with a high performing team. Their five spirits empower the team to dream bigger and better and help them realize their ambitious aspirations. To achieve this, On views talent as a priority and they rely on a robust hiring process, which only accepts 1% of applicants, and they invest in employee development through bespoke programs. The diversity of their team is also a key priority as they aspire to positively impact the world. Their global team, including their senior leadership team, has almost an approximately equal gender split. On’s highest score in their recent engagement survey in April 2021 was for diversity and inclusion, which demonstrates their ability to create a culture of belonging, and they strive to maintain this in the future.

Company's Unique Risks

They rely on technical innovation, unique designs and high-quality products to compete in the market for their products. If they fail to continue to innovate and provide consumers with design features and new technologies that meet their expectations, they may not be able to generate sufficient consumer interest in their athletic and technical footwear, apparel and accessories to remain competitive.

Because their business is highly concentrated on a single, discretionary product category, namely footwear, apparel and accessories, they are vulnerable to changes in consumer preferences that could harm their sales, profitability and financial condition.

They have generated net losses in the past and may incur net losses in the future. For the years ended December 31, 2020 and 2019, they generated net losses of CHF 27.5 million and CHF 1.5 million, respectively. For the six-month periods ended June 30, 2021 and 2020, they generated net income of CHF 3.8 million and net losses of CHF 33.1 million, respectively. They will need to generate and sustain increased net sales and net income levels in future periods in order to increase profitability, and, even if they do, they may not be able to maintain or increase their level of profitability over the long term. They intend to continue to expend significant funds to grow their business, and they may not be able to increase their net sales enough to offset their higher operating expenses

Competitors have and will likely continue to attempt to imitate their premium products and technology and divert sales.

The COVID-19 pandemic and related government, private sector, and individual consumer responsive actions have adversely affected, and may continue to adversely affect their business operations, the operations of their suppliers and other business partners, store traffic, employee availability, and their financial condition, liquidity and cash flow. The effects of the COVID-19 pandemic have also negatively impacted many of their business partners, such as the retail stores and distributers that sell their products, and are likely to continue to adversely impact some or all of such partners for the foreseeable future. The spread of COVID-19 has caused public health officials to impose restrictions and recommend precautions to mitigate the spread of the virus, especially when congregating in heavily populated areas, such as malls and fitness centers. Throughout 2020, a majority of their retail partners closed stores.

Their growth strategy involves the continued expansion of their DTC channel, including their own retail stores and e-commerce platform, which may present risks and challenges with which they have limited experience. Their business involves distributing products on a wholesale basis for resale through their retail partners and also includes a multi-channel experience, including physical and online retail stores that are owned and operated by them. Growing their e-commerce platforms and the number of physical stores owned by them is essential to their growth strategy, as is innovation and expanding their product offerings available through these channels. However, they have limited operating experience executing this strategy, given the first retail store owned and operated by them opened only in late 2019 for the first time in China, followed by their flagship location in New York City in 2020. Their DTC channel continues to represent an increasing percentage of their net sales, which may expose them to other risks, including those relating to continue to grow brand awareness.

They may not be able to successfully open new store locations in a timely manner, if at all, which could harm their results of operations.

The operations of many of their suppliers and third-party manufacturers are subject to additional risks that are beyond their control and that could harm their business, financial condition and results of operations. Almost all of their manufacturing and raw material suppliers are located outside the United States. In addition, they work with select third-party distributors, especially in the initial stages of expansion for highly complicated products and in new markets, and because they ultimately do not control those third parties, they are subject to additional risks at a results of such relationships. In 2020, 97% of their footwear was produced in Vietnam, while the remainder was produced in Indonesia, and in the six-month period ended June 30, 2021, all of their footwear products were produced in Vietnam. Moreover, in 2020 and the six-month period ended June 30, 2021, approximately 63% and 38%, respectively, of their apparel and accessories products were manufactured in China, with the remainder being produced in Vietnam and Europe. All of their products are manufactured by third party manufacturers. As a result of their international suppliers, they are subject to risks associated with doing business in multiple jurisdictions.

They rely on third-party suppliers to provide fabrics and other subcomponents for and to produce their footwear, apparel and accessories, and they have limited control over them and may not be able to obtain quality products on a timely basis or in sufficient quantity.

They rely on a large number of complex IT systems. The integration of these IT systems may not be successful. Any failure to operate, maintain and upgrade their IT systems may materially and adversely affect their operations.

Changes to trade policies, tariffs and import/export regulations in the United States, EU and other jurisdictions, or their failure to comply with such regulations, may have a material adverse effect on their reputation, business, financial condition and results of operations.

The dual class structure of their shares and the existing ownership of Class B voting rights shares by their extended founder team have the effect of concentrating voting control with their extended founder team for the foreseeable future, which will limit or preclude your ability to influence corporate matters. Given the increased voting power of their Class B voting rights shares, members of their extended founder team, who are their only Class B shareholders, will hold approximately 59.4% of total combined voting power of their outstanding shares following the completion of this offering.

Their dual class structure may depress the trading price of their Class A ordinary shares. Their dual class structure may result in a lower or more volatile market price of their Class A ordinary shares or in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies with dual or multiple class share structures in certain of their indexes. S&P Dow Jones, MSCI and FTSE Russell have announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500

They are an “emerging growth company” and they cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make their Class A ordinary shares less attractive to investors.

Bottom Line

In 2020, they had net sales of CHF 425.3 million, gross margin of 54.3%, gross profit of CHF 231.1 million, net loss of CHF 27.5 million, Adjusted EBITDA Margin of 11.7% and Adjusted EBITDA of CHF 49.8 million. In the six-month period ended June 30, 2021, they had net sales of CHF 315.5 million, gross margin of 59.3%, gross profit of CHF 187.2 million, net income of CHF 3.8 million, Adjusted EBITDA Margin of 15.0% and Adjusted EBITDA of CHF 47.3 million.

They grew their net sales at a 66% CAGR from 2018 to 2020, had net income of CHF 5.5 million in 2018 compared to net loss of CHF 27.5 million in 2020 and Adjusted EBITDA grew at a 74% CAGR from 2018 to 2020, while their gross margin remained flat from 54.2% and 54.3%, respectively, and Adjusted EBITDA Margin expanded from 10.8% to 11.7%, respectively, over the same period. They grew their net sales at a 62.6% CAGR from the six-month period ended June 30, 2019 to the six-month period ended June 30, 2021 and had net income of CHF 8.2 million in the six-month period ended June 30, 2019 compared to net income of CHF 3.8 million in the six-month period ended June 30, 2021, while their Adjusted EBITDA grew at a 70.3% CAGR from the six-month period ended June 30, 2019 to the six-month period ended June 30, 2021. In addition, their gross margin grew from 52.9% to 59.3%, and their Adjusted EBITDA Margin expanded from 13.7% to 15.0%, in each case, over the same period.

On is a premium performance sports brand rooted in technology, design and impact that has built a passionate global community of fans across more than 60 countries. They have a selective wholesale presence in approximately 8,100 premium retail doors globally and they generated 37.7% and 36.6% of their net sales in 2020 and the six-month period ended June 30, 2021, respectively, through their direct-to-consumer (“DTC”) channel, which is primarily driven by their website. They believe they are one of the fastest-growing scaled athletic sports companies in the world, having grown their net sales at an 85% compound annual growth rate (“CAGR”) from inception through 2020 to CHF 425.3 million for the year ended December 31, 2020. The exceptional performance, comfort and design of On footwear and sports apparel has led runners and a broader set of consumers to adopt On’s products in their everyday lives. They have supported their strong demand by creating performance products for an active lifestyle and exploration of nature and trails. The On apparel range includes ultralight and stretchable fabrics, intelligently engineered key details and a style designed equally for the track and the street. Their “Essentials” range includes the running jacket, running shorts, sweatpants and other items that are versatile enough to be worn during running, exploring or simply during all-day activities. Today, their products are present in some of the most reputable outdoor, fashion and lifestyle retailers in the world, in addition to specialty running stores. In 2020 and the six-month period ended June 30, 2021, their wholesale channel accounted for 62.3% and 63.4% of their net sales, respectively. With their community and brand awareness growing globally, they organically started to scale their DTC channel through on-running.com over the last 9 years. DTC sales have increased significantly.

Their core opportunity is the approximately $300 billion global sportswear market—an intersection of the $119 billion sports footwear market and the $174 billion sports apparel market. According to Euromonitor International, the global sportswear market is projected to grow at a 8.9% CAGR over the next five years, outpacing the global non-sports footwear and apparel market five-year CAGR of 6.8%. According to Euromonitor International, the global sports footwear market generated $119 billion of retail sales in 2020 and is expected to grow at 9.9% per year through 2025, compared to the 5.3% yearly growth for non-sports footwear. According to Euromonitor International, the global sports apparel market generated $174 billion of retail sales in 2020 and is expected to grow at 8.2% per year through 2025, compared to the 7.0% yearly growth for non-sports apparel. They see significant potential to further expand their business globally. They have launched and achieved significant growth in more than 60 countries since their launch and they believe their continued expansion in key geographies will accelerate their growth and brand awareness in the sportswear market

With a fast growing social presence fueled by storytelling, athletes and both physical and digital live events, they have the ability to drive brand affinity through a large audience. There is no better validation for their products than professional athletes trusting their shoes in the most demanding settings. Olympians and World Champions in track and field embrace their products and proudly display them on the world stage. By creating globally owned event series such as their 5k run crew ‘Squad Races’ or their yearly ‘Run Your Local Mountain’, they have invited thousands of broadly active runners to test and discover their brand. By further developing and adding new formats, they plan to reach and grow their community even further. They are in a growth phase in almost all of their international markets and they believe they have opportunities for continued market share gains. While they have generated net losses in recent years, they have achieved significant net sales growth historically as they have entered new markets. They believe that pioneering a true multi-channel strategy will ultimately lead to superior outcomes, lower cost of customer acquisition and higher customer retention and repeat purchases. They intend to take a measured approach to attract new customers and enter new markets through selected retail partners that are complementary to their brand. The second pillar to the multi-channel growth is their DTC channel, both digital and physical, which they believe enables greater consumer engagement and offers an optimal environment to showcase their brand. They believe they can leverage their expertise in running to improve the functionality of products in adjacent lifestyles, including fitness, everyday use, outdoors and most recently tennis, and to broaden their product portfolio from footwear to apparel and accessories. As of August 2020, On benefits from the newly established free trade agreement between the EU and Vietnam. The full impact is expected to materialize in 2021, and they expect a continued positive impact on their margins going forward. They intend to expand their DTC channel in high-value markets that can support the profitable rollout of e-commerce and select retail stores. As of June 30, 2021, On worked with distribution partners in 25 countries. As they grow, they expect to transition some of those distributor markets to a direct retail distribution system, which will allow them to more efficiently and profoundly influence the customer experience. As they continue their growth trajectory, they expect to realize economies of scale. At the same time, they plan to continue to invest into all areas of the business as part of their geographical and product expansion.

They focus their innovation efforts on the areas of performance, design and impact, as they aspire to increase performance for athletes and consumers, apply smarter design thinking to their products and create the path to a more sustainable future. On products have an iconic design and are versatile to use, as they synergistically combine engineering solutions with a minimalist Swiss design aesthetic. They believe their relentless focus on innovation, design and Swiss quality leads to advanced products that allow them to maintain premium price points and encourage repeat purchases among their customers. They have been privileged to receive very early support from a global team of world-renowned athletes and brand ambassadors who continue to showcase the advances in their innovation through their exceptional performances on some of the sports world’s largest stages. On’s early success came from word-of-mouth recommendations, and they have continued to develop storytelling through the rapidly growing digital channels, social networking media and public relations, which has proven to be a more authentic and effective brand marketing strategy than traditional advertising. Despite being founded just over ten years ago, On has significant global reach with 49% of their 2020 net sales to customers in North America, 44% to customers in Europe, 5% to customers in Asia-Pacific and the remaining 2% to customers in the Rest of the World. They believe their uncompromising approach to delivering an authentic and unmatched consumer experience resonates with a broad and diverse global consumer base that spans genders and generations. On is committed to growth from sustainable resource use. On has built an in-house team of experts which tracks the environmental footprint of all their activities through lifecycle analyses, identifies their largest levers for a positive impact and helps them set meaningful targets. They use recycled materials wherever available and work with their suppliers to create new opportunities to use circular or non-petrol- and non-food-chain-based materials. They consider their DTC and wholesale channels highly complementary and brand-enhancing. Their DTC channel is their fastest growing channel and has higher gross margins than their wholesale channel. From the very beginning, building a scalable and adaptable operating infrastructure was important to ensure that the right manufacturing, logistics and data capabilities were in place to efficiently support their future growth. Their adaptable supply chain, well established manufacturing and distribution partners and their global infrastructure allow them to seamlessly and rapidly scale their operations across diverse geographies and sales channels while ensuring delivery of superior quality products and services. On views talent as a priority and they rely on a robust hiring process, which only accepts 1% of applicants, and they invest in employee development through bespoke programs.

If they fail to continue to innovate and provide consumers with design features and new technologies that meet their expectations, they may not be able to generate sufficient consumer interest in their athletic and technical footwear, apparel and accessories to remain competitive. Because their business is highly concentrated on a single, discretionary product category, namely footwear, apparel and accessories, they are vulnerable to changes in consumer preferences that could harm their sales, profitability and financial condition. They have generated net losses in the past and may incur net losses in the future. For the years ended December 31, 2020 and 2019, they generated net losses of CHF 27.5 million and CHF 1.5 million, respectively. For the six-month periods ended June 30, 2021 and 2020, they generated net income of CHF 3.8 million and net losses of CHF 33.1 million, respectively. The effects of the COVID-19 pandemic have also negatively impacted many of their business partners, such as the retail stores and distributers that sell their products, and are likely to continue to adversely impact some or all of such partners for the foreseeable future. The spread of COVID-19 has caused public health officials to impose restrictions and recommend precautions to mitigate the spread of the virus, especially when congregating in heavily populated areas, such as malls and fitness centers. Throughout 2020, a majority of their retail partners closed stores. Growing their e-commerce platforms and the number of physical stores owned by them is essential to their growth strategy, as is innovation and expanding their product offerings available through these channels. However, they have limited operating experience executing this strategy, given the first retail store owned and operated by them opened only in late 2019 for the first time in China, followed by their flagship location in New York City in 2020. Their DTC channel continues to represent an increasing percentage of their net sales, which may expose them to other risks, including those relating to continue to grow brand awareness. They may not be able to successfully open new store locations in a timely manner, if at all, which could harm their results of operations. Almost all of their manufacturing and raw material suppliers are located outside the United States. In addition, they work with select third-party distributors, especially in the initial stages of expansion for highly complicated products and in new markets, and because they ultimately do not control those third parties, they are subject to additional risks at a results of such relationships. They rely on third-party suppliers to provide fabrics and other subcomponents for and to produce their footwear, apparel and accessories, and they have limited control over them and may not be able to obtain quality products on a timely basis or in sufficient quantity. They rely on a large number of complex IT systems. Changes to trade policies, tariffs and import/export regulations in the United States, EU and other jurisdictions, or their failure to comply with such regulations, may have a material adverse effect on their reputation, business, financial condition and results of operations. Given the increased voting power of their Class B voting rights shares, members of their extended founder team, who are their only Class B shareholders, will hold approximately 59.4% of total combined voting power of their outstanding shares following the completion of this offering. Certain index providers have announced restrictions on including companies with dual or multiple class share structures in certain of their indexes. S&P Dow Jones, MSCI and FTSE Russell have announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500. They are an “emerging growth company” and they cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make their Class A ordinary shares less attractive to investors.